Floods blamed as Thai output fell in March, but hopes high
BANGKOK, April 27 — Thai factory output fell a bigger-than-expected 3.17 per cent in March from the year-earlier month as the impact of last year's floods on industry persisted, but the government still predicts output will rise 6-7 per cent this year.
The Industry Ministry expects major flood-hit industries to be back to normal around the middle of the year, and economists said the central bank will likely keep interest rates low to support the recovery.
“We think our major industries will recover 100 per cent around June as more than half are fully back now,” Verasak Supprasert, a specialist at the ministry's Office of Industrial Economics, told a news conference.
Output dropped 3.17 per cent in March after a revised 3.16 per cent fall year on year in February. A Reuters poll had forecast a fall of 0.5 per cent in March. Compared with February, output rose 11.5 per cent.
Output plummeted 47 per cent in November from the year-earlier month as the worst floods in decades hit auto and electronics firms. It fell 9.3 per cent for the whole of last year.
Thailand is a regional hub for the world's top car makers, and the world's number two producer of hard disk drives.
Verasak did not say when annual output would return to growth after shrinking 7.1 per cent in the first quarter.
No smooth sailing
Output is expected to remain weak in coming months, weighing on exports, as industrial goods account for about 65 per cent of total shipments.
Customs data showed exports unexpectedly fell 6.5 per cent in March from a year earlier, while imports surged 25.6 per cent, producing a record trade deficit of $4.6 billion (RM13.8 billion), due to the floods and faltering global demand..
“Taken together, this is a clear indication that the road to normalcy is not going to be as smooth-sailing as some had earlier expected,” said Gundy Cahyadi, an economist at OCBC Bank in Singapore.
The Bank of Thailand has said production may only get back to normal in the third quarter of this year. It predicts exports growth of 7.8 per cent, but the Commerce Ministry forecast a 15 per cent rise.
The central bank left its benchmark interest rate THCBIR=ECI unchanged at 3.0 per cent at its last meeting on March 21 after cuts at the previous two meetings.
Economists expect no change in the policy rate at the BOT's review on May 2, and perhaps all year.
The economy grew just 0.1 per cent in 2011 due to the floods, but the central bank expects it to expand 5.7 per cent this year due to spending and reconstruction.
The Finance Ministry estimated economic growth of 2 per cent in the first quarter year-on-year.
Porametee Vimolsrir, deputy secretary-general of the National Economic and Social Development Board, told Reuters on April 11 the economy probably saw double-digit growth in the first quarter from the previous three months, when it suffered a contraction of 10.7 per cent.
The board, which complies GDP data in Thailand, forecast economic growth of 5.5-6.5 per cent for 2012. It is due to release first-quarter GDP data and its new forecasts on May 21. — Reuters